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New-Home Sales Tumble: Temporary Setback?

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Sales of newly built single-family homes plunged 11.4 percent in March, led by large dips in the Midwest and South, the Commerce Department reported Thursday. It was the largest drop in new home sales since July 2013 and follows three consecutive months of large gains.

"After two robust months of new home sales, some readjustment is inevitable," says David Crowe, chief economist of the National Association of Home Builders. Still, "this is the best first quarter since 2008, and attractive mortgage rates and pent-up demand should keep the market moving in the right direction."

New-home sales reached a seasonally adjusted annual rate of 481,000 units in March. New home sales in March dropped 33.3 percent in the Northeast and 15.8 percent in the South – the largest decline since July 2013. Sales also fell 3.4 percent in the West. The Midwest was the only major region of the U.S. to see an increase last month with new-home sales rising 5.9 percent month-over-month.

The inventory of new homes for sale rose 1.9 percent last month to a 5.3-month supply at the current sales pace. Inventories of new-homes are at 213,000 -- less than half of what they were during the height of the housing boom.